Archive for the ‘Management’ Category

There is a common myth that for super large scale companies it makes sense to build their own data center instead of using a public cloud.

In many cases I believe this is exactly the opposite. For many companies, time to market, focus and top line are more critical than a theoretical saving 20% on the cost.

The Killing , Wikipedia

Consider Netflix and Zynga. Both companies are large and smart enough to build their own private clouds.

Zynga chose to leave AWS and build their own cloud infrastructure. Netflix chose to stay on AWS, probably with a huge discount.

Their stock price might hint on which company made the right choice.

Netflix Vs Zynga

Netflix focused the company’s energy on moving from a tech company into a movie production studio with shows like “House of Cards” , “Arrested Development”,”The Killing” and “Orange is the new Black”. Zynga was busy in becoming a data center company. Instead of focusing on social games and preparing for the next big change into Mobile.

The more generic point is that the bottleneck in most companies is a person. More specifically, it is management attention. If everyone is busy in building a private cloud and purchasing 1000’s of servers, no one has time to create a new business line.

The thought is that a private cloud becomes attractive with huge scale because the number of devops people to write software has an upper bound.

This might be true, but there are very few people in the world who have already done it, and hiring takes a lot of time.

The other option is to hire inexperienced people, at least on this scale, and they would make mistakes.

Companies like Netflix and Zynga are supposed to have 70-90% gross margin. Reducing cost of hardware from 20% to 15% is nice, but even that is not straight forward. And in any case, it is much less important than losing or creating a new $1B on the revenue side.

Sometimes I feel like a character in a Dilbert cartoon. Why would a very senior, smart executive, who is Not a functional idiot make an obviously senseless choice?

Here are few examples

George W. Bush senior, a new product management director, wanted to move Daniel , who now reports to him, into a new position. For some reason, he chose to discuss it first with Emmy who reports to Daniel. Daniel learned about the new plans from Emmy and was insulted twice. Emmy was also distressed about the weird behavior of her Director.

Senior accountant Jack Silverman sent an email to 100,000 employees – “Some people are not filling their expense report forms correctly. They keep putting the expenses with decimal points, while the system can only expect integers. This is breaking our ERP and causing a lot of work for the finance department. Employees who continue to make this mistake would face disciplinary actions and may be fired, if they do not amend their ways.”

Senior VP Jack Welsh decided to shut down the new social media network “Buddy Buddy” as the engineering team in Texas failed to deliver a working product for over a year. The official reason was that “Buddy Buddy” overlaps the existing product line. Three months later, Jack announced a new product called “Chuku Chuku” which will connect people through social interactions. The new product leader would be Shlomo Shlomo who ran “Buddy Buddy” .

Food for thought

George R.Martin , the new CEO just a hired Donald Duck as his new VP of product management. Three months later he decided to fire Donald. He quickly hired Mickey Mouse , an experienced product marketing manager , but fired him as well after four months. Even Pluto did not last more than five months at the job. While this unfortunate turn of events can happen to the best, George never ran a background check and reference check on any of the candidates. George has been very strict regarding reference checks when his managers had new candidates, but he felt his intuition is good enough for the most senior positions In the company.

Morgan Dexter was a successful QA Executive for a large Pharmaceutical company for many years. For various reasons, the new management decided to find a new person to replace him. They wanted to do it respectfully, so allowed Dexter time to find a new position in the corporate. To everyone’s surprise. Dexter kept using his previous title, in public forums, even 12 months after the change has already happened.

“A body of men holding themselves accountable to nobody ought not to be trusted by anybody.”
― Thomas Paine

One of the most dangerous leaders to have in a company is the unaccountable #2.

UNANT, for short , is usually a former founder, or a top executive, who is still involved in the company, but has no direct reports, or clear accountability for a specific business line.

It can be the CTO, chief strategy officer,the vice chairman or any other obscure title.

Because of his seniority,status and experience the UNANT advises are actually considered decisions.

Unlike other managers, his decisions don’t have to be backed by budgets or organizational support , as he is not the one executing them or responsible for the outcome. It also makes life hard for the rest of the team. Who wants to contradict a member of the board?

Name this #2

In many cases, the lack of accountability , while the authority exists, makes it hard to distinguish “decisions” from “opinion”.

The UNANT tends use annoying stories from 20 years ago to show he is right (=everyone else is wrong ).

“What’s so hard? We wrote version Three in two hours, we only had a broken typewriter , one chair for four people and we sold 50,000 copies in three days.”

The UNANT also comes up with original ideas like “If every developer puts an extra hour a day on cleaning the office we can fire our cleaners and save lots of money”

The only worst organizational type is the unaccountable #2 spin master .He actually has direct reports and theoretical responsibility , but manages to never pay the price for his decisions. His direct reports are usually being replaced 🙂

Here is a story. I’m sitting in a room with an extremely intelligent person. Our new VP of product marketing – Mr Y. He has an MBA from one of the finest universities in the world ,a track record as a C level executive in a Fortune 100 company. He is articulate and presents an amazing vision for the future of our company. Moreover, he defines concrete examples how we will be using social media and go beyond traditional enterprise marketing. I’m quite impressed. Finally, we have someone in marketing who knows what he is talking about.

One month later, Mr Y Speaks in an executive forum. He repeats exactly the same story with the same social media example and same jokes. I’m getting a bit suspicious , but as the great Jack Welch said – communicating your message is one of the top leadership roles. So, I give Mr Y the credit that he is talking to a new audience.

Two months later, Mer Y is already working with us for four months. We are in a customer conference. The same exact story, word by word 😦 . Two months later he was not working with us anymore …

He is probably a “Type A” functional idiot.

I recently learned the term “Functional Idiot” which I really like. Unfortunately it is not well-defined, yet. The Urban Dictionary definition for “Functional Idiot” is :

Type C functional idiot – A person who used to be very smart and effective, but became outdated and irrelevant (e.g Dan Margalit might be an example for the Israeli audience)

Let’s say you are walking around the office and you spot a “Functional Idiot” make a stupid decision. Let me provide you with tools to rationalize it.

Here is a second story. In a board meeting, you realize one of your board members (Let’s call him Prisoner X) suggests the company should release a “simple self-service” version of your costly, sophisticated enterprise product. This could have been a great suggestion. But we already did it six months ago and discussed it multiple times with him.

The challenge is that Prisoner X is quite smart and has a very good track record in the industry. How can we explain the fact he get’s $40K$ a month ,but is not able to remember the main products of his four companies?

Prisoner X is probably a type B functional idiot. He is very smart in the big picture and in identifying opportunities, but he is very bad in operational work and following details.

Type C functional idiots are easier to spot. You would usually find them in the CTO office, they have the word “Strategy” in their title. in a recent example I was observing a very long thread on the pros and cons of C vs C++. The heated discussions was taking place in 2012 by people with an amazing track record in the high-tech industry history. And it was a very interesting discussion to have. In 1996.

To conclude,It is essential to identify functional idiots and tell them apart. Otherwise we are all doomed 🙂

How can I change the HP board of directors? This is quite impossible as I have a very tiny share of HP shares. But the largest owner has only 7%.

The classic capitalist answer is that I could sell my HP share, and if many people follow my footprints, the board would “Get the message”. However, there are some very nice incentives for being a board member ($381,000 per year in this case) , so there is no reason for board members to resign. For example John H. Hammergren is a director of HP since 2005 and despite of the stock decline he did not “get it”.

Maybe he is an amazing director ,I don’t have any data, but the stock does not reflect it.

HP (HPQ) Stock Price 2007 To 2012

In theory, I can send a fax a nominate my own director , but I have the feeling it would be challenging, as the process is complex.

In other companies, in which the CEO has 10%+ of the share, things might get even worst, as a minority shareholder (10% is smaller than 90% 🙂 ) is running the show, and effectively selects the board members on his own. There are many conflicts as a result. It is very hard to believe that his own compensation as an employee is not highly biased because of his shareholder position.

* For other larger costs one should have brought receipts (Taxis , Hospitality)

* For a long travel an employee could get a cash advance or a deposit to his bank account

French Toast in The Grove with Strawberries

Nowadays it has become much worst , although automation should have made life simpler

* The fixed daily amount was deleted, so a receipt is needed for every item purchased, even $1 bubble gum.

* The previous allowance is now the daily maximum . Let’s say on Monday I was extremely busy with customer visits and only grabbed a $7 Burger King lunch. On Tuesday I ate the hotel breakfast ($23), some vietnamis noodles for lunch ($7) and nice Italian dinner in San Francisco ($50) . In the past, corporate would understand people might not eat the same way every day. These days the corporate would reimburse me $57 for the two days , instead of $87 actually “eaten”.

* Since sales people abused their expense accounts to get lap dances, every receipt has to be “Itemized” . Corporates want to validate that expenses are not spent on Whiskey, Women and fancy Falafel. I’m quite confident that sales people have ways to solve the problem, but for the poor developers that’s just another annoying rule.

* There is no cash advance. The employee is supposed to pay for all the expenses with his private credit card. “Corporate Credit Card” are a fiction and do not really exist in Israel.Even in the US the mechanism is problematic , because the employee is personally liable for unpaid accounts, and his credit reputation might be damaged when corporate delays payments.

The problem , like in many other cases, is that finance department focuses on the minority of unethical employees and creates a huge bureaucratic workflow that wastes more money than it aims to saves. While finance administration might be easier, it is amazing that an employee needs to spend 3-4 hours post travel to get back the private money he spent.

Since the costs of checking all these rules become very high, many corporates outsource the auditing to a far away country, with people who can’t read our language and have litle understanding of business, business travel and local facts. Try and explain to an auditor from India your Hebrew Receipt for a Big Data conference (or vice versa).

Of course, once you get high enough in the pyramid , you can delegate such chores to your admin (I’m guilty as charged) , and once you get high enough to change the process you forget how annoying this type of activity is…..

It’s not a crime to be innocent, these things we have not done
But you’re not some little child, spring is past and gone
Well I know my craving heart and I’ve seen your vicious eyes
And I think we know the truth, both you and I
Don’t flutter your lashes like a little girl
And ask me why it’s such a cruel, cruel world, no
Don’t ask any more stupid questions
You already know the answers to,

New Model Army, Stupid Questions

Lawyers represent a huge risk to the business. Most of them believe their role is to insure they can never be blamed for any decision made, rather than the traditional role of a business – to make money.

And I’m not even talking about external lawyers who are looking for ways to sue you 🙂 these are your own employees who earn their living of your business.

A typical discussion with the legal department goes something like this:

Manager: Can I Do X?

Legal:No, it is risky.

Manager:But It is Really Important.

Legal: I’ll check.

Legal never get back so the managers pings legal two weeks later.

Manager : What’s the answer? Legal : You can’t.

Manager : Why? Because it is very risky for IP\TAX\HR\Contract reasons.

Happy Legal Expert Taking Risks

I have learned a few rules to mitigate the risk from the legal department.

Learn the principles. My two MBA courses on contracts and law in information systems have given me enough basics to ask hard questions.

Managers should understand employees’ social rights , benefits and different employment models etc. This is important part of the role, not “HR department role”.

Always start from the business goal. The lawyer cannot argue about that because he does not understand the business and because you are the owner.

If you are hiring the lawyers get the good ones who understand business and are service oriented.

If you are using internal legal and get bad service – complain. Legal is a service provider , just like the IT department. If their responses are slow, inaccurate or unhelpful to te manager one should talk to their executive and ask for assistance.

Demand domain expertise. High-Tech Lawyers should understand the difference between SaaS ans On Premise, for example.

Use standard forms,standard contracts, standard NDA etc. It is not scalable to rethink these for each relationship.

Request service, not consulting. For example :” want to have a OEM partnership with X in two weeks because it is going to add 20M$ for us next year. Please handle the legal parts ASAP”

Give the lawyers context and business reasons: what are you trying to achieve, who is the other side, what’s the urgency, what’s the reward.

Don’t go legal unless you have to.Risk is everywhere – bugs, features, unhappy customers. As managers we manage risk without even thinking about it. Lawyers are trained to think only about the risks and have a very strong bias against action. In decisions where risk is understood and is small , it is better to leave legal out of the picture.

Unless we are talking about tax or death issues , no one is going to come back to the manager 10 years from now and blame him anyway

Insurance is a great way to quantify risk and can be used in many cases. For example , instead of long debates on what will happen if your web site is crashed by aliens, it is simpler to buy insurance.

“Risk to legal department” != “Risk to the business”

Magic words: “I understand the risk and I accept it, If things go wrong this is my business decision”.Since most lawyers are just looking to cover their behinds, this is what they need to hear.